Expert Advice
A Risk Management Guide for Marketing and Management Consultants

Chapter 2: Understanding Small Business Insurance for Independent Consultants
Part 3: Essential Insurance Policies for Marketing and Management Consultants
Umbrella Liability Insurance

When you're a sole proprietor or independent contractor, the stakes are high because you're personally liable for any debts or liens leveled against your business. At the same time, it might not make financial sense to increase your primary policy limits. Umbrella insurance is your cost-effective alternative.

Umbrella Liability Insurance (aka Excess Liability Insurance) isn't like the other insurance policies we've explored because it's neither a standalone policy nor an endorsement. Instead, Umbrella Insurance works with your other insurance policies to provide you with extra liability protection.

You may consider this policy if you want to…

  • Increase your protection against certain exposures. You can put Umbrella coverage toward your General Liability Insurance, Hired & Non-Owned Auto Insurance, and Employer's Liability Insurance (part of most Workers' Compensation plans).
  • Cut costs, not corners. An Excess Liability policy often costs as little as a couple hundred dollars a year for millions more in coverage.
  • Strengthen your business protection plan. More protection means more security if you are ever tangled up in a General Liability or Employer's Liability lawsuit.

$1 million in Umbrella protection is available for a few hundred dollars per year.

So how does Umbrella Insurance work? Consider this scenario.

Let's say that a potential (and wealthy) client enters your management consulting office and trips over the small step down to your lobby. Upon impact, the client breaks his hand and sues your business for $200,000 worth of medical costs, $250,000 in lost wages, and another $50,000 for pain and suffering. Somehow, his lawyer convinced the jury to find you liable for it all.

But with $100,000 in legal fees on top of the settlement amount, the claim has long surpassed your General Liability Insurance's limit ($500,000). When you have Umbrella Insurance, you can file a claim with that policy, which covers the additional $100,000 you need to settle the claim.

Though Umbrella Insurance is a versatile coverage, it cannot be used to finance Errors & Omissions claims. Be sure to get in touch with your insureon agent if you're interested in cost-effective options for raising your E&O limits.

Umbrella Liability Insurance cannot be used to finance E & O claims.

Next: Part 4: Small Business Insurance Endorsements for Independent Consultants

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